Court rules on exigent; USPS assumes at least $1.4 billion more surcharge revenue; will argue for more; asks PRC to continue surcharge while it deliberates; customers face continuing uncertainty and higher postage – June 10,2015

We reported on the U.S. Appeals Court ruling on Friday in an Alliance Alert. The court ruled that the Postal Regulatory Commission (PRC) was reasonable to determine that the impact of the 2007-2009 recession is exceptional only for a limited time until it becomes the “new normal.” In other words, we prevailed on our most important endeavor—that the exigent surcharge will not be permanent.

On the other hand, as we predicted in an Alliance Report following the September 9, 2014 oral arguments, the court remanded the case back to the PRC to do more work on its methodology to determine how much lost volume and revenue should be counted and therefore recovered through a surcharge. They did this by rejecting the PRC method called “count once” which the court described as: “In enforcing a ‘count once’ limitation for lost mail, the Commission refused to recognize the cost to the Postal Service of lost mail volume beyond the year in which it first disappeared.”

On Monday, June 8, the United States Postal Service (USPS) filed a motion at the PRC to “suspend exigent surcharge removal provisions” that are in place to curtail the surcharge when its contribution hits $2.8 billion and exigent revenue reaches $3.2 billion in August. USPS contends that the court’s overruling of the “count once” methodology means that the PRC must continue counting all recession-caused lost mail volume at least until the “new normal” was reached. They calculate this to be an additional $1.2 billion in contribution which equates to $1.4 billion in surcharge revenue. USPS says that the additional several months of surcharging of customers will easily allow the PRC enough time to have proceedings to decide what the ultimate amount will be.

The USPS signaled that it will argue for much more exigent revenue than the additional $1.4 billion with the following rationale: “Because, in fact, the Postal Service had no realistic opportunity to make reductions in institutional costs in response to the massive volume declines, the Commission needs to reconsider its ‘new normal’ framework.” This will be a very important issue for the PRC to decide on in the coming weeks.

The “new normal” that is definitely true for major customers of the USPS is that the uncertainty about future postage rates will continue and the ability to forecast this major cost will be very much hampered for some time to come. In fact, the period of USPS efforts to break through the inflation price cap, and attendant unpredictability, will reach its five year anniversary next month.

(c) 2015 Alliance of Nonprofit Mailers